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2016 (9) TMI 356 - ALLAHABAD HIGH COURT

2016 (9) TMI 356 - ALLAHABAD HIGH COURT - TMI - Declared goods - roasted groundnuts - rate of tax - validity of 1979 circular and withdrawn on 2004 - Whether roasted groundnuts are declared goods under Section 14 (vi) (i) of the Central Sales Tax, 1956? - scope of the term 'that is to say' - Held that: - It is trite to note that in Gopuram [1994 (8) TMI 233 - SUPREME COURT OF INDIA], three learned Judges of the Supreme Court have noticed and held that the usage of the phrase ''that is to say' in .....

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14. The 1979 circular in unequivocal terms held out that roasted groundnuts would be liable to be considered as falling within the ambit of clause (vi) (i). The 2004 circular represented an authoritative yet paradigm shift from what was permitted to hold the field for decades namely, the 1979 circular. The 2004 circular, it may be noted, did not rest itself upon a declaration of the law that roasted groundnut would not be covered. - The 1979 circular was issued by the Commissioner of Trade .....

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nd a reconsideration of the vexed issue of taxability of roasted groundnut and whether it was liable to be treated as an unclassified item. However the moment one arrives at the conclusion that the 2004 circular was merely an outcome of an exercise of "revisit" and "reconsideration" and not an expression of opinion based upon an authoritative pronouncement of law by a competent court, it must be treated as having prospective operation. - Prior to the promulgation of the 2004 circular the 197 .....

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nding counsel for the respondent. These revisions raise the following questions of law: - "A. Whether roasted groundnuts are declared goods under Section 14 (vi) (i) of the Central Sales Tax, 1956? B. Whether in view of the circular dated 20.07.1979 issued by the Commissioner of Trade Tax, U.P Lucknow groundnuts could be taxed as an unclassified commodity prior to 23.05.04?" While the revision raises the question as to whether roasted groundnuts stand covered under the entry "grou .....

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circular. In terms of the 1979 Circular, the Commissioner, Trade Tax U.P. clarified that roasted groundnuts were liable to be treated as comprised in clause (vi) (i) of Section 14 of the 1956 Act. The entry under clause (vi) and with which we are concerned reads thus: - "(vi) Oilseeds, that is say. - (i) Groundnut or Peanut (Arachis hypogaea];" From the submission of the learned counsel for the revisionist, it transpires that based upon the aforesaid circular, the revisionist-assessee .....

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as to whether roasted groundnut would stand covered by the entry "groundnut" as used in clause (vi) (i) of Section 14. This reference to the Law Department itself is stated to have been occasioned on account of a conflict between the circular dated 1979 circular and the letter dated 3 March 2001 addressed by the Assistant Commissioner (Law), Trade Tax, U.P. The Law Department basing its opinion on a judgment rendered by the Supreme Court in Gopuram Gram Mill Company and another Vs. St .....

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on 20 March 2001 and 29 August 2001. The first appellate authority affirmed these orders by a common order dated 7 February 2002 and the Tribunal by its judgment dated 3 June 2005. The dates noted above would show that the assessee was assessed to tax and denied the benefits of section 14 prior to the issuance of the 2004 circular. Sri S.D. Singh has advanced the following submissions: - A. The 1979 circular of the Commissioner continued to hold the field till it was overridden on 24 May 2004. H .....

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equent 2004 circular cannot retroactively take away a benefit which stood conferred upon the assessee. C. Tax under the U.P. Trade Tax Act 19485, is an indirect impost, which a selling dealer is entitled to pass on to a purchaser. In the transactions effected during the course of the two assessment years in question, the tax liability which was passed onto the purchaser was based upon the understanding that the 1979 circular applied. Accordingly it was submitted that no retrospective liability c .....

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a roasting and salting process would loose its identity as groundnut. It was submitted that the Supreme Court had held that it was possible to envisage two different commercial commodities falling under the same entry of Section 14. In such a situation the Supreme Court held that there was no reason why the entry should be restricted to only one of them. He submitted that the subsequent decision rendered by three Judges of the Supreme Court in Gopuram did not notice Milak and even otherwise was .....

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er Products Ltd Vs. Commissioner of Central Excise (1999) 7 SCC 84 3. State of Karnataka and another Sri Lakshmi Coconut Industries (1997) 11 SCC 621 4. M/s. KBB Nuts Pvt Ltd Vs. Commissioner of Value Added Tax ST. Appl.5/2014 dated 28 March 2014 [Delhi High Court] Sri B.K. Pandey per contra, made the following submissions: - A. The 2004 circular of the Commissioner had in express term annulled the 1979 circular. This recital in the 2004 circular would have to be construed as if the 1979 circula .....

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to be treated as declaratory. He submits that not only was Gopuram rendered by a larger Bench of the Supreme Court than which decided Milak, the law as enunciated therein would always deemed to have operated. D. This Court should not and cannot grant primacy to the 1979 circular over and above what the Supreme Court held in Gopuram. Sri Pandey in support of his submissions above, relied upon the judgment of the Supreme Court in Commissioner of Central Excise, Bolpur Vs. M/s. Ratan Melting & .....

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;that is to say' indicates the intent of the legislature to make clear or fix the meaning of what is sought to be explained or defined. Their Lordships held that the phrase ''that is to say' indicates an exhaustive enumeration and therefore consequently the benefit of Section 14 must be limited to the goods expressly mentioned therein. Now it needs to be borne in mind that no judgment of this Court or for that matter the Supreme Court directly deals/dealt with the issue of whethe .....

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ed in treading with caution before applying a judgment which has come to be rendered with reference to the provisions of another statute. This more so when the Court finds that the Customs Tariff Act 1975 did not employ the words "that is to say". Similarly Gopuram while dealing with the provisions of the 1956 Act, was construing "gram" and whether parched or fried gram would stand covered. Of course Gopuram does stress upon and underline the significance of the phrase " .....

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authoritative yet paradigm shift from what was permitted to hold the field for decades namely, the 1979 circular. The 2004 circular, it may be noted, did not rest itself upon a declaration of the law that roasted groundnut would not be covered. It was based upon the opinion of the Law Department of the State which in turn rested upon the interpretation to section 14 as accorded to it by the Supreme Court in Gopuram. This Court, it must be noted, is not called upon to test the correctness of the .....

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s no doubt that as per the above notification if any amount of duty has been paid on the raw material, the output product would escape from excise duty. The doubt arose was regarding the expression in the notification i.e." on which the appropriate amount of duty of excise has already been paid" as to whether it is capable of two interpretations, one as claimed by the assessee and the other as put forth by the revenue". 19. No doubt the court has to interpret statutory provisions .....

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atter that an assessee can contest the validity or legality of a departmental instruction. But that right cannot be conceded to the department, more so when others have acted according to such instructions, [vide Collector of Central Excise. Bombay vs. Collector of Central Excise [1996(88) ELT 638], Ranadey Micronutrients vs. collector of Central Excise [1996(87) ELT 19], Poulose and Mathen vs. collector of central Excise [1997(90) ELT 264, British Machinery Supplies Co. vs. Union of India [1996 .....

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doubt, Learned judges in that decision have observed thus: "One aspect deserves to be noticed in this context. The earlier tariff advice no. 83/81 on the basis of which trade notice No. 222/81 was issued by the Collector of Central Excise and Customs is binding on the department. It should be given effect to . There is no material on record to show that this has been rescinded or departed from, and even so, to what extent. Even assuming that the later tariff advice No.6/85 has taken a diffe .....

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uot; (emphasis supplied) Declaring the law in similar terms in Paper Products the Supreme Court held: - "4. The question for our consideration in these appeals is: what is the true nature and effect of the Circulars issued by the Board in exercise of its power under Section 37-B of the Central Excise Act, 1944? This question is no more res integra in view of the various judgments of this Court. This Court in a catena of decisions has held that the Circulars issued under Section 37-B of the .....

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ector of Central Excise (1996 (87) ELT 19), this Court held that the whole objective of such Circulars is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of excise duty. The Court also held that it does not lie in the mouth of the Revenue to repudiate a Circular issued by the Board on the basis that it is inconsistent with a statutory provision. (emphasis supplied). Consistency and discipline are, according to this Court, of far .....

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, it is an admitted fact that by virtue of Circular No.4/85 dated 23.7.1986 as clarified by Circular dated 7.8.1987, all the three products of the appellant are to be treated as the products of the printing industry and not that of the packaging industry. A change in the said view of the Board occurred for the first time by virtue of its Circular No.6/89 dated 16.1.1989. Further, the Board itself by its subsequent Circular No.29/89 dated 5.5.1989 has made it abundantly clear that the change noti .....

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The impugned show cause notices and consequent demand being ab initio bad inasmuch as the same was contrary to the existing Circulars of the Board, the same cannot be sustained." (emphasis supplied) A Constitution Bench in Ratan Melting summarized the law in the following words- "2. It was noted by the three-Judge Bench that the effect of the aforesaid observations was noted in several decisions. In Kalyani Packaging Industry v. Union of India and Anr. (2004 (6) SCC 719), it was noted .....

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ng on all courts/tribunals and bodies. It is clear that circulars of the Board cannot prevail over the law laid down by this Court. However, it was pointed out that during hearing of Dhiren Chemical case because of the circulars of the Board in many cases the Department had granted benefits of exemption notifications. It was submitted that on the interpretation now given by this Court in Dhiren Chemical case the Revenue was likely to reopen cases. Thus para 9 (para 11 in SCC) was incorporated to .....

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of the Constitution Bench of this Court. Where as a result of dispute the matter is sub judice, a court/tribunal is, after Dhiren Chemical case, bound to interpret as set out in that judgment. To hold otherwise and to interpret in the manner suggested would mean that courts/tribunals have to ignore a judgment of this Court and follow circulars of the Board. That was not what was meant by para 9 of Dhiren Chemical case." "5. Circulars and instructions issued by the Board are no doubt bi .....

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statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law." What is discernible from the law as declared by the Supreme Court is that circulars issued by departmental authorities in exercise of statutory powers is clearly binding on them though not on courts or tri .....

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a juncture a party cannot contend that the circular would continue to operate even though it may run contrary to a binding verdict or declaration of law by a High Court or the Supreme Court. The primary purpose as noted by the Supreme Court in holding the department to the views taken and expressed in such circulars is to ensure a uniform practice and to enable the trade to arrange its business accordingly. If the above principles as enunciated by the Supreme Court are borne in mind it is clear .....

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nefits flowing from section 14. Its actions were based entirely upon the 1979 circular which continued to hold the field till 24 May 2004 when the second circular came to be issued. All transactions prior to 24 May 2004 were therefore liable to be treated in accordance with the provisions of the 1979 circular. That then takes us to the issue of whether the 2004 circular had the effect of impacting transactions which had already been subjected to tax prior thereto. To this the answer must obvious .....

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t becomes worthy of note, was merely a communication of the Assistant Commissioner (Law). It was not a circular issued by the Commissioner of Trade Tax in exercise of statutory powers. It did not have the effect of overriding or rescinding the 1979 circular. The 2004 circular can be rightly described as an outcome of a revisit and a reconsideration of the vexed issue of taxability of roasted groundnut and whether it was liable to be treated as an unclassified item. However the moment one arrives .....

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